Redundancies are imminent, everyone's afraid for their jobs, and along comes a throng of new hires on guaranteed bonuses.
Guaranteed bonuses mean precisely that - recipients are guaranteed the bonus specified in their contract regardless of the situation. "You can't be laid off," explains Adam Jama of search firm Napier Scott. "If they get rid of you, you will still get your guaranteed bonus - if you've been promised $1m, you will get your $1m."
Several banks hired staff on guarantees into now dead areas like securitization, CDOs and leveraged finance right up to July and August. And those people have just begun to arrive, following the end of their three-month notice periods.
UBS, for example, announced in June that it had hired Donald Belanger from Credit Suisse as head of real estate capital markets, along with members of his team (it didn't say whether Belanger was offered a guarantee, but we're assuming he was). Belanger arrived around eight weeks ago. In the interim, property finance has bombed, and Belanger's first move was apparently to clear out some of the existing staff.
"Everyone had to re-interview for their old jobs and several members of the team were culled," says one headhunter. UBS declined to comment.
UBS isn't alone in hiring big hitters on probable guarantees into now defunct-looking areas. Morgan Stanley announced in July that it was hiring Graham Keniston-Cooper from Lazard to build a private equity business in Europe. In the same month, Barclays Capital hired a team of six bankers from Credit Suisse to focus on leveraged finance and financial sponsors. And headhunters say Wachovia, Soc Gen and Deutsche all hired securitization specialists over the summer.
With holders of guaranteed bonuses set to be paid no matter what, banks have no incentive to make them redundant. Existing staff are therefore left in a vulnerable position, regardless of their performance over the previous 12 months.
Some savvy bankers appear to have garnered guarantees at the start of last year merely by threatening to leave. "The four senior guys on one bank's structured credit team all threatened to resign around the start of this year," says a headhunter. "They all got bought back with high guarantees beyond anything they can expect to be paid now, and they're all laughing,"